Welcome back to another episode where we bring you exclusive insider news straight from the heart of Toronto's real estate scene. In this edition, we've got three invaluable pieces of information that you won't find anywhere else. If you're eager to stay ahead of the curve in the ever-evolving world of real estate, keep reading!
#1 The Prolonged Occupancy Period Explained
Let's kick things off with a quick primer on the often misunderstood concept of occupancy in pre-construction condos. When you receive the keys to your condo, it's known as the occupancy closing or interim closing. However, you don't yet own the unit; you're essentially "renting" it from the developer and paying an occupancy fee.
This fee is composed of three components: mortgage interest, condo fees, and property tax. The mortgage interest, which is the biggest portion, is based on the Bank of Canada's 1-year conventional mortgage rate. And here's where the pain sets in - the current rate is above 7%.
Why is it taking so long to reach the final closing when you can put more money down and reduce your monthly interest payments? It's not the developers' fault; it's the government. Specifically, it's the City of Toronto that needs to complete building inspections before the developer can proceed to final closing. Unfortunately, the pandemic has caused delays as many City employees are "working from home." Both buyers and developers are eager to expedite this process, so they can access their funds and reinvest in new projects.
#2 Construction Workers Seeking Stability
In the pre-interest-rate-hike era, it was challenging to hire construction workers due to high demand. Developers were happy to hire anyone available. However, with many projects on hold, the tables have turned. Construction workers now seek job stability and are looking to work with reputable developers who have a steady pipeline of projects. This shift aligns with recent job reports showing the loss of 45,000 construction jobs.
#3 Developers Still Selling Despite Market Challenges
You may have noticed an influx of new pre-construction projects hitting the market recently. This may seem surprising, given the belief that most investors have stepped back, and projects are struggling to sell.
Developers have a compelling reason to continue selling - they want to maintain their workforce. Firing and then rehiring employees when the market recovers is far from ideal. To do this, they employ one of three strategies:
Cutting Profit Margins: Selling at a lower price to attract buyers.
Offering Incentives: Providing perks like rental guarantees.
Maintaining Price Point: Holding firm on pricing due to confidence in the product's quality.
Which strategy do you think is most effective? As a selective investor, I've observed that when projects compete to sell, investors reap exceptional value. If you're interested in knowing which upcoming project offers the best value, schedule a call with me at the link below.
There you have it - three exclusive pieces of insider news that shed light on Toronto's real estate market. From the challenges of prolonged occupancy periods to the changing landscape for construction workers and the strategies developers employ to keep projects moving, we've covered it all. Stay tuned for more exclusive insights and remember to like, subscribe, and hit the bell to stay ahead in the dynamic world of Toronto real estate. If you're ready to seize opportunities, schedule a call with me today!